MICROCHIP TECHNOLOGY INCORPORATED (Exact Name Of Registrant As Specified In Its Charter) |
Delaware | 0-21184 | 86-0629024 |
(State Or Other Jurisdiction Of Incorporation) | (Commission File No.) | (IRS Employer Identification No.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits | |
99.1 | Microchip Technology Announces Financial Results for Third Quarter Fiscal Year 2015 |
Dated: January 29, 2015 | Microchip Technology Incorporated (Registrant) |
By: /s/ J. Eric Bjornholt | |
J. Eric Bjornholt Vice President, Chief Financial Officer (Principal Accounting and Financial Officer) |
99.1 | Microchip Technology Announces Financial Results for Third Quarter Fiscal Year 2015 |
![]() | EXHIBIT 99.1 NEWS RELEASE INVESTOR RELATIONS CONTACT: J. Eric Bjornholt -- CFO..... (480) 792-7804 |
• | Non-GAAP net sales of $535.8 million, down 1.9% sequentially and better than the midpoint of our improved guidance from December 2, 2014. |
• | On a non-GAAP basis: gross margins of 58.2%; operating income of $169.3 million; net income of $143.3 million and EPS of 64 cents per diluted share. The First Call published estimate for non-GAAP EPS was 62 cents. |
• | GAAP net sales of $528.7 million, down 3.2% sequentially. The difference in GAAP and non-GAAP net sales was driven by a planned revenue recognition change for ISSC Technologies, which we acquired in July 2014. |
• | On a GAAP basis: gross margins of 57.1%; operating income of $98.0 million; net income of $86.1 million; and EPS of 39 cents per diluted share. There was no First Call published estimate for GAAP EPS. |
(in millions, except earnings per diluted share and percentages) | Three Months Ended December 31, 2014 | |||
GAAP | % of Net Sales | Non-GAAP1 | % of Net Sales | |
Net Sales | $528.7 | $535.8 | ||
Gross Margin | $302.0 | 57.1% | $311.6 | 58.2% |
Operating Income | $98.0 | 18.5% | $169.3 | 31.6% |
Other Expense (including Gains/Losses on Equity Method Investments) | $(11.8) | $(9.3) | ||
Income Tax Provision (benefit) | $1.4 | $16.5 | ||
Net Income before noncontrolling interest | ||||
Net Income (loss) from noncontrolling interest | $(1.3) | $0.3 | ||
Net Income Attributable to Microchip | $86.1 | 16.3% | $143.3 | 26.7% |
Earnings per Diluted Share | 39 cents | 64 cents |
• | Microchip expanded its offering of 8-bit PIC® microcontrollers (MCUs) with integrated Core Independent Peripherals, which reduce interrupt latency, lower power consumption, and increase system efficiency and safety while minimizing design time and effort. The new PIC16(L)F161X family enables closed-loop digital control of motors, safety monitoring and a wide variety of other advanced functions. |
• | The new dsPIC33 "EV" family of 16-bit Digital Signal Controllers (DSCs) provides 5V operation for improved noise immunity and robustness, which is ideal for harsh environments such as appliances, automobiles and industrial applications. These DSCs also integrate advanced motor control, CAN and SENT communication, and touch-sensing peripherals. |
• | In the 32-bit MCU arena, Microchip continued to grow its portfolio with the low-cost PIC32MX1/2/5 series, with a feature-rich peripheral mix and large, scalable memory options. This latest series enables a wide range of applications, including digital audio, Bluetooth®, industrial connectivity, USB communication and general-purpose embedded control, all at lower prices. |
• | Microchip added three new families to its vast Analog & Interface portfolio. The latest Digitally Enhanced Power Analog (DEPA) MCP19118/9 controllers offer digital power-supply flexibility with easy analog control loops, via the combination of simple analog PWM control and a configurable MCU in a compact circuit solution. Additionally, our first high-speed MCP37DX1-200 and MCP372X1-200 analog-to-digital converters feature the industry's lowest power consumption with16-bit, 200 Msps performance. Our two new energy-measurement analog front ends completed Microchip's MCP391X family, which spans one to eight channels with high accuracy and a large amount of integration for smart meters and power monitoring. |
• | The Company continued to grow its automotive-infotainment solutions and business, with two new products and the announcement that the FAW Group became the first Chinese car maker to adopt our MOST® network controllers. Microchip's new USB84604 USB2.0 four-port controller hub with FlexConnect technology connects smart phones to automotive infotainment systems. Microchip also joined The Linux Foundation and Automotive Grade Linux, and began providing a beta version of its Linux driver to early-adopter customers, thus enabling designers to use the Linux operating system with its portfolio of MOST network interface controllers. |
• | Microchip also grew its touch and gesture sensing portfolio with two new chips and a strategic partnership with Xymox Technologies for printed multi-touch sensor solutions that, in combination with Microchip's low-power touch electronics, lower the cost and speed the design of human interfaces. The second member of its award-winning and patented GestIC® family-the MGC3030 3D gesture controller-features simplified user-interface options focused on gesture detection, enabling true one-step gesture designs for high-volume, cost-sensitive consumer and embedded applications, such as toys, audio and lighting. Additionally, our MTCH65X high-voltage, projected-capacitive touchscreen line driver provides advanced touch performance and increases the signal-to-noise ratio for robustness. |
• | In the memory arena, Microchip added two new families to its SuperFlash® portfolio, which features the world's fastest erase times and superior reliability among embedded Flash memory chips. The SST26WF080B/040B expands Microchip's family of Serial Quad I/O™, SuperFlash memory devices with 1.8V, low-power 4-Mbit and 8-Mbit members that are ideal for applications such as mobile handsets, Bluetooth headsets, GPS, camera modules, hearing aids and any battery-powered product. The SST26WF016B, announced earlier in the quarter, offers 16-Mbit of memory. |
• | The Company released its fourth-generation JukeBlox® streaming audio entertainment platform, which enables audio brands to develop high-quality, low-latency products at competitive consumer price points, such as standalone or multi-room wireless speakers, AV receivers, mini and micro systems, and sound bars. |
• | Finally, four Microchip products were named to EDN Magazine's Hot 100 Products of 2014, including: the SST38VF640xB (MEMORY AND STORAGE), the PIC16(L)F170X/1X (MICROCONTROLLERS AND PROCESSORS), the MCP39F501 (POWER), and the RN4020 (WIRELESS & NETWORKING). |
Microchip Consolidated Guidance | |||
GAAP | Non-GAAP Adjustments | Non-GAAP1 | |
Net Sales | $537.2 to $547.9 million | $4.0 million | $541.2 to $551.9 million |
Gross Margin2 | 57.9% to 58.1% | $3.9 to $4.0 million | 58.2% to 58.4% |
Operating Expenses2 | 37.7% to 38.1% | $60.7 to $61.9 million | 26.2% to 26.6% |
Other Expense | $10.5 million | $2.5 million | $8.0 million |
Income Tax Expense | 9.75% to 10.25% | $7.9 to $8.1 million | 10.5% to 11.0% |
Net Income before noncontrolling interest | $86.0 to $91.4 million | $59.1 to $60.5 million | $145.1 to $151.9 million |
Less Net Income (Loss) from noncontrolling interest3 | ($0.8 million) | $1.0 million | $0.2 million |
Net Income | $86.8 to $92.2 million | $58.1 to $59.5 million | $144.9 to $151.7million |
Diluted Common Shares Outstanding4 | Approximately 225.4 million shares | Approximately 0.5 million shares | Approximately 224.9 million shares |
Earnings per Diluted Share | 39 to 41 cents | about 26 cents | 65 to 67 cents |
1 | See the "Use of Non-GAAP Financial Measures" section of this release. |
2 | Earnings per share have been calculated based on the diluted shares outstanding of Microchip on a consolidated basis. |
3 | See Footnote 3 under the "Use of Non-GAAP Financial Measures" section of this release. |
4 | See Footnote 4 under the "Use of Non-GAAP Financial Measures" section of this release. |
• | Microchip's inventory days at March 31, 2015 are expected to increase by 3 to 8 days to between 114 days and 119 days. Our actual inventory level will depend on the inventory that our distributors decide to hold to support their customers, overall demand for our products and our production levels. |
• | Capital expenditures for the quarter ending March 31, 2015 are expected to be approximately $40 million and capital expenditures for all of fiscal year 2015 are anticipated to be approximately $160 million. We are continuing to take actions to selectively invest in the equipment needed to support the expected growth of our new products and technologies. |
• | We expect net cash generation during the March quarter of $140 million to $160 million prior to the dividend payment, changes in borrowing levels, and our acquisition-related activities. |
1 | Use of non-GAAP Financial Measures: Our non-GAAP adjustments, where applicable, include the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, severance costs, and legal and other general and administrative expenses associated with acquisitions), a gain recognized on a strategic investment in a company we acquired during the third quarter of fiscal 2014, non-cash interest expense on our convertible debentures, the related income tax implications of these items and non-recurring tax events. Our non-GAAP net sales reflect revenue from the sell-through of products from ISSC's distributors that is not recognized for GAAP purposes because of a change in contractual terms that moves future shipments of product to these distributors to a sell-through revenue recognition model. We believe that our disclosure of non-GAAP revenue provides investors with information regarding the true end market demand for the Company's products. |
2 | Generally, gross margin fluctuates over time, driven primarily by the mix of microcontrollers, mixed-signal products, analog products and memory products sold and licensing revenue; variances in manufacturing yields; fixed cost absorption; wafer fab loading levels; costs of wafers from foundries; inventory reserves; pricing pressures in our non-proprietary product lines; and competitive and economic conditions. Operating expenses fluctuate over time, primarily due to net sales and profit levels. |
3 | We acquired a controlling interest in ISSC Technologies in July 2014. As of December 31, 2014, we owned 91.1% of ISSC and we expect to own 100% of the shares by the end of the first quarter of fiscal year 2016. |
4 | Diluted Common Shares Outstanding can vary for, among other things, the trading price of our common stock, the actual exercise of options or vesting of restricted stock units, the potential for incremental dilutive shares from our convertible debentures (additional information regarding our share count is available in the investor relations section of our website under the heading "Supplemental Financial Information"), and the repurchase or the issuance of stock. The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the March 2015 quarter of $46 per share (however, we make no prediction as to what our actual share price will be for such period or any other period and we cannot estimate what our stock option exercise activity will be during the quarter). |
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
(in thousands except per share amounts) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net sales | $ | 528,710 | $ | 482,372 | $ | 1,603,829 | $ | 1,437,833 | ||||||||
Cost of sales | 226,751 | 199,652 | 687,897 | 599,676 | ||||||||||||
Gross profit | 301,959 | 282,720 | 915,932 | 838,157 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 88,697 | 76,341 | 261,881 | 227,680 | ||||||||||||
Selling, general and administrative | 66,668 | 66,856 | 207,037 | 201,934 | ||||||||||||
Amortization of acquired intangible assets | 47,582 | 21,804 | 129,659 | 73,225 | ||||||||||||
Special charges | 1,003 | 801 | 2,082 | 2,491 | ||||||||||||
203,950 | 165,802 | 600,659 | 505,330 | |||||||||||||
Operating income | 98,009 | 116,918 | 315,273 | 332,827 | ||||||||||||
(Losses) gains on equity method investments | (62 | ) | 150 | (129 | ) | (211 | ) | |||||||||
Other expense, net | (11,756 | ) | (4,480 | ) | (31,258 | ) | (18,486 | ) | ||||||||
Income before income taxes | 86,191 | 112,588 | 283,886 | 314,130 | ||||||||||||
Income tax provision | 1,393 | 7,187 | 17,141 | 30,344 | ||||||||||||
Net income | 84,798 | 105,401 | 266,745 | 283,786 | ||||||||||||
Less: Net loss attributable to noncontrolling interests | 1,259 | — | 2,862 | — | ||||||||||||
Net income attributable to Microchip Technology | $ | 86,057 | $ | 105,401 | $ | 269,607 | $ | 283,786 | ||||||||
Basic net income per common share attributable to Microchip Technology stockholders | $ | 0.43 | $ | 0.53 | $ | 1.34 | $ | 1.43 | ||||||||
Diluted net income per common share attributable to Microchip Technology stockholders | $ | 0.39 | $ | 0.48 | $ | 1.20 | $ | 1.31 | ||||||||
Basic common shares outstanding | 201,203 | 198,759 | 200,673 | 197,845 | ||||||||||||
Diluted common shares outstanding | 223,487 | 219,089 | 224,433 | 215,943 | ||||||||||||
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) | |||||||||
ASSETS | |||||||||
December 31, | March 31, | ||||||||
2014 | 2014 | ||||||||
(Unaudited) | |||||||||
Cash and short-term investments | $ | 1,122,458 | $ | 1,344,785 | |||||
Accounts receivable, net | 242,595 | 242,405 | |||||||
Inventories | 276,143 | 262,725 | |||||||
Deferred tax assets | 50,490 | 67,490 | |||||||
Assets held for sale | 13,985 | — | |||||||
Other current assets | 77,808 | 51,994 | |||||||
Total current assets | 1,783,479 | 1,969,399 | |||||||
Property, plant & equipment, net | 577,123 | 531,967 | |||||||
Long-term investments | 1,107,224 | 798,712 | |||||||
Other assets | 1,161,091 | 767,552 | |||||||
Total assets | $ | 4,628,917 | $ | 4,067,630 | |||||
LIABILITIES AND EQUITY | |||||||||
Accounts payable and other accrued liabilities | $ | 181,322 | $ | 170,781 | |||||
Short-term borrowings | 17,500 | 17,500 | |||||||
Deferred income on shipments to distributors | 154,264 | 147,798 | |||||||
Total current liabilities | 353,086 | 336,079 | |||||||
Long-term line of credit | 644,375 | 300,000 | |||||||
Long-term borrowings, net | 318,457 | 331,385 | |||||||
Junior convertible debentures | 379,263 | 371,873 | |||||||
Long-term income tax payable | 138,388 | 179,966 | |||||||
Long-term deferred tax liability | 468,842 | 375,316 | |||||||
Other long-term liabilities | 44,228 | 37,550 | |||||||
Microchip Technology stockholders' equity | 2,256,289 | 2,135,461 | |||||||
Noncontrolling interests | 25,989 | — | |||||||
Total equity | 2,282,278 | 2,135,461 | |||||||
Total liabilities and equity | $ | 4,628,917 | $ | 4,067,630 |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net sales, as reported | $ | 528,710 | $ | 482,372 | $ | 1,603,829 | $ | 1,437,833 | |||||||
Distributor revenue recognition adjustment | 7,118 | — | 9,587 | — | |||||||||||
Non-GAAP net sales | $ | 535,828 | $ | 482,372 | $ | 1,613,416 | $ | 1,437,833 |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Gross profit, as reported | $ | 301,959 | $ | 282,720 | $ | 915,932 | $ | 838,157 | |||||||
Distributor revenue recognition adjustment | 3,203 | — | 4,565 | — | |||||||||||
Share-based compensation expense | 2,290 | 1,841 | 6,985 | 5,674 | |||||||||||
Acquisition-related acquired inventory valuation costs | 4,191 | 42 | 24,692 | 42 | |||||||||||
Non-GAAP gross profit | $ | 311,643 | $ | 284,603 | $ | 952,174 | $ | 843,873 | |||||||
Non-GAAP gross profit percentage | 58.2 | % | 59.0 | % | 59.0 | % | 58.7 | % |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Research and development expenses, as reported | $ | 88,697 | $ | 76,341 | $ | 261,881 | $ | 227,680 | |||||||
Share-based compensation expense | (7,075 | ) | (6,141 | ) | (20,645 | ) | (18,762 | ) | |||||||
Non-GAAP research and development expenses | $ | 81,622 | $ | 70,200 | $ | 241,236 | $ | 208,918 | |||||||
Non-GAAP research and development expenses as a percentage of net sales | 15.2 | % | 14.6 | % | 15.0 | % | 14.5 | % |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Selling, general and administrative expenses, as reported | $ | 66,668 | $ | 66,856 | $ | 207,037 | $ | 201,934 | |||||||
Share-based compensation expense | (5,454 | ) | (5,737 | ) | (15,783 | ) | (16,939 | ) | |||||||
Acquisition-related costs | (523 | ) | (503 | ) | (3,260 | ) | (1,774 | ) | |||||||
Non-GAAP selling, general and administrative expenses | $ | 60,691 | $ | 60,616 | $ | 187,994 | $ | 183,221 | |||||||
Non-GAAP selling, general and administrative expenses as a percentage of net sales | 11.3 | % | 12.6 | % | 11.7 | % | 12.7 | % |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Operating expenses, as reported | $ | 203,950 | $ | 165,802 | $ | 600,659 | $ | 505,330 | |||||||
Share-based compensation expense | (12,529 | ) | (11,878 | ) | (36,428 | ) | (35,701 | ) | |||||||
Acquisition-related costs | (523 | ) | (503 | ) | (3,260 | ) | (1,774 | ) | |||||||
Amortization of acquired intangible assets | (47,582 | ) | (21,804 | ) | (129,659 | ) | (73,225 | ) | |||||||
Special charges | (1,003 | ) | (801 | ) | (2,082 | ) | (2,491 | ) | |||||||
Non-GAAP operating expenses | $ | 142,313 | $ | 130,816 | $ | 429,230 | $ | 392,139 | |||||||
Non-GAAP operating expenses as a percentage of net sales | 26.6 | % | 27.1 | % | 26.6 | % | 27.3 | % |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Operating income, as reported | $ | 98,009 | $ | 116,918 | $ | 315,273 | $ | 332,827 | |||||||
Distributor revenue recognition adjustment | 3,203 | — | 4,565 | — | |||||||||||
Share-based compensation expense | 14,819 | 13,719 | 43,413 | 41,375 | |||||||||||
Acquisition-related acquired inventory valuation and other costs | 4,714 | 545 | 27,952 | 1,816 | |||||||||||
Amortization of acquired intangible assets | 47,582 | 21,804 | 129,659 | 73,225 | |||||||||||
Special charges | 1,003 | 801 | 2,082 | 2,491 | |||||||||||
Non-GAAP operating income | $ | 169,330 | $ | 153,787 | $ | 522,944 | $ | 451,734 | |||||||
Non-GAAP operating income as a percentage of net sales | 31.6 | % | 31.9 | % | 32.4 | % | 31.4 | % |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Other expense, net, as reported | $ | (11,756 | ) | $ | (4,480 | ) | $ | (31,258 | ) | $ | (18,486 | ) | |||
Convertible debt non-cash interest expense | 2,501 | 2,286 | 7,311 | 6,682 | |||||||||||
Gain on shares of acquired company | — | (2,438 | ) | — | (2,438 | ) | |||||||||
Non-GAAP other expense, net | $ | (9,255 | ) | $ | (4,632 | ) | $ | (23,947 | ) | $ | (14,242 | ) | |||
Non-GAAP other expense, net, as a percentage of net sales | -1.7 | % | -1.0 | % | -1.5 | % | -1.0 | % |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Income tax provision, as reported | $ | 1,393 | $ | 7,187 | $ | 17,141 | $ | 30,344 | |||||||
Income tax rate, as reported | 1.6 | % | 6.4 | % | 6.0 | % | 9.7 | % | |||||||
Distributor revenue recognition adjustment | 448 | — | 823 | — | |||||||||||
Share-based compensation expense | 3,632 | 1,510 | 6,885 | 4,501 | |||||||||||
Acquisition-related acquired inventory valuation costs, intangible asset amortization and other costs | 5,799 | 392 | 14,696 | 1,172 | |||||||||||
Special charges | 339 | 300 | 723 | 933 | |||||||||||
Convertible debt non-cash interest expense | 929 | 856 | 2,716 | 2,502 | |||||||||||
Non-recurring tax events | 3,931 | 6,172 | 9,983 | 8,167 | |||||||||||
Non-GAAP income tax provision | $ | 16,471 | $ | 16,417 | $ | 52,967 | $ | 47,619 | |||||||
Non-GAAP income tax rate | 10.3 | % | 11.0 | % | 10.6 | % | 10.9 | % |
Three months ended | Nine months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income attributable to Microchip Technology, as reported | $ | 86,057 | $ | 105,401 | $ | 269,607 | $ | 283,786 | |||||||
Noncontrolling interests | (1,533 | ) | — | (3,623 | ) | — | |||||||||
Distributor revenue recognition adjustment, net of tax effect | 2,755 | — | 3,742 | — | |||||||||||
Share-based compensation expense, net of tax effect | 11,187 | 12,209 | 36,528 | 36,874 | |||||||||||
Acquisition-related acquired inventory valuation costs, intangible asset amortization and other costs, net of tax effect | 46,497 | 21,957 | 142,915 | 73,869 | |||||||||||
Special charges, net of tax effect | 664 | 501 | 1,359 | 1,558 | |||||||||||
Convertible debt non-cash interest expense, net of tax effect | 1,572 | 1,430 | 4,595 | 4,180 | |||||||||||
Gain on shares of acquired company | — | (2,438 | ) | — | (2,438 | ) | |||||||||
Non-recurring tax events | (3,931 | ) | (6,172 | ) | (9,983 | ) | (8,167 | ) | |||||||
Non-GAAP net income attributable to Microchip Technology | $ | 143,268 | $ | 132,888 | $ | 445,140 | $ | 389,662 | |||||||
Non-GAAP net income attributable to Microchip Technology as a percentage of net sales | 26.7 | % | 27.5 | % | 27.6 | % | 27.1 | % | |||||||
Diluted net income per common share attributable to Microchip Technology stockholders, as reported | $ | 0.39 | $ | 0.48 | $ | 1.20 | $ | 1.31 | |||||||
Non-GAAP diluted net income per common share attributable to Microchip Technology stockholders | $ | 0.64 | $ | 0.61 | $ | 1.99 | $ | 1.81 | |||||||
Diluted common shares outstanding, as reported | 223,487 | 219,089 | 224,433 | 215,943 | |||||||||||
Diluted common shares outstanding Non-GAAP | 223,077 | 218,371 | 223,883 | 215,251 |